A specter is haunting our economy: stickiness.
Or so some say.
A chief dogma of Keynesianism has it that we suffer from “sticky prices.” By this, Keynesians mean wage rates and other prices that don’t change fast enough for a fast-changing economy.
After the crash of ’29, the story runs, sticky prices prevented the economy from finding a new, lower price level and we were left with idle resources and an “unemployment equilibrium.” That latter term was John Maynard Keynes’s coinage for the unpleasant steady state where some resources (usually labor) wind up underused.
To fight this, Keynesians task governments with pushing money into the system to increase “aggregate demand,” buying up those previously fallow resources.
My trouble with this business about stickiness begins with a historical perspective: Before governments began micro-meddling in the economy, prices seemed less sticky.
The great story about this was told by W.H. Hutt, who noted that, in the early days of pro-union interventionism, Fabian socialist luminary Sidney Webb spat vitriol at the unions of his day (after the Great War) for the unions’ part in maintaining high wage rates in the face of a deliberate deflation. Union recalcitrance caused massive unemployment, and Webb knew it.
Privately, he called the union leaders “pigs.”
Publicly, he said nothing. He couldn’t risk losing union support, though the unions’ demands were causing a major depression.
In America, too, government support for stickiness became the rule, not the exception. After the onset of the Great Depression, President Herbert Hoover orchestrated a behind-the-scenes attempt at a wage freeze, to prevent wages from falling. His successor, Franklin Roosevelt, went further, instituting anticompetitive price fixing schemes using the National Recovery Act, and a vast regime of quota guarantees and price supports for agriculture . . . all this while the country descended into poverty, and the people became increasingly unable to pay the high prices.
It’s no coincidence that our earlier depressions didn’t last as long as the first one that Keynes was able to influence. In their respective first years, the 1920 downturn was worse than the 1929–1930 downturn. By 1923 things were rolling along nicely. That certainly couldn’t be said about the third year of what we now know as the Great Depression — a more than decade-long debacle.
Stickiness is, at the very least, one of those problems made worse by government.
Indeed, turning to government to solve stickiness is like calling in a hunter to treat a wounded animal. Why? Government is in the stickiness business.
Everything government does tends towards the sticky. Government has never been known for quick adaptability or lightning-swift response.
One reason so many sought government jobs, in the past, was not because such jobs paid better (they usually didn’t, in the good ol’ days) but because government provided the ultimate in job security.
Further, politicians — the alleged management team — buttress their own positions with a sticky web of influence and advantage. In representative democracies, at least, the long trend of “professionalism” has made it harder and harder to oust any one worker, much less whole bureaus of them. And our representatives have become increasingly resistant to challenge.
If anyone can be said to epitomize stickiness in our society, it is politicians themselves.
And you could hardly find a better example of this ecto-sticky specter than Sen. Arlen Specter, the man who recently switched parties.
Specter has been a Republican since after his stint on the Warren Commission. He’s been a senator for decades, now. And this week he announced that he would hand in his GOP punch card to become a card-carrying member of the Democratic Party.
He did this because Pat Toomey, a former congressman and late head of the Club for Growth, threw his hat in the ring. Polls showed that Specter would likely be ousted in a GOP primary.
You might say that his switch proves him quite adaptable to circumstance, the very opposite of “sticky.” “Slippery” might be better, no?
The real point is that he is hanging on to his seat at all costs. Repudiated by his party? Well, then, he will try the other!
What’s sticky, here, is his hold on power.
He might be able to pull this off. He has the name recognition, and the power of his office.
Specter has always been close to Democrats on issues like abortion and excessive government spending. And though he has insisted that he won’t play lackey to the Democratic hierarchy, there seems to be no good reason for his new party to marginalize him. Instead, the party rejoices.
But the whole effect of this move is to show, again, how hard it is for challengers — for we the people — to change the course of government.
Last year, under the unlamented Bush administration, our Keynesians in charge decided that the best way to meet the first hints of an economic downturn was to pour billions, billions and more billions at the very people who had screwed up.
American citizens wrote and phoned their representatives in a landslide of protest at the proposal, its very premise as well as its enormity. And the House voted down the first bill. But it didn’t take long for both the House and Senate to betray demonstrated voter preference.
Just a few weeks ago, the much-lauded Obama pushed through a successor bailout, and Arlen Specter voted for it. He was praised by Democrats for his loyalty to the dominant political vision of society (our money is theirs; no millionaire must suffer). And now he has joined them.
Whether these measures will turn our most recent economic downturn into another Great Depression or, instead, sputter off, letting the economy recover of its own accord . . . I don’t know. But I do know what politicians like Obama and Specter are counting on: A belief in the importance of their “doing something.”
Yup, spending trillions they don’t have qualifies as “doing something.” Even if it defies common sense.
And upon such superficialities — and the lack of term limits — the “stickiness” of modern politics rests.